Mortgage alert: Nationwide Building Society and Barclays hike interest rates in blow to property market

Property market analysts warn recent mortgage rate cuts risk moving in a 'negative direction'

Several of Britain's largest mortgage providers are pushing up their rates from Thursday, with Nationwide Building Society and Barcalys implementing increases of as much as 0.35 percentage points.

Virgin MOney and Coventry Building Society are similarly raising their pricing in a move that industry analysts warn could undermine the fragile housing market recovery.

The rate hikes follow a surge in oil prices this week after the ceasefire agreement between Iran and the United States collapsed.

Swap rates, which significantly influence how lenders price fixed-rate mortgages, have climbed in recent days, forcing providers to adjust their offerings.

The increases mark a reversal after a month of steadily declining mortgage costs, during which the Middle East conflict that erupted in February had appeared to be calming.

Property experts have expressed alarm that the increases could derail a housing market already under strain.

Liam Daly, an economist at the Centre for Economics and Business Research, said: "After mortgage rates fell notably in June, there was growing optimism that a sustained period of relative stability in the Middle East would reduce the risk of interest rates hikes, and that falling mortgage rates would gradually restore some affordability and activity in the UK housing market."

He added that with the conflict "appearing to enter a new intensified phase, the momentum is again shifting in a negative direction".

Lewis Shaw, a broker at Shaw Financial Services, said: "This will sap what little confidence was creeping back into the housing market." During April and May, when rates peaked, average house prices fell 0.6 per cent according to Nationwide figures, representing the first decline of 2026.

Ian Futcher, a financial planner at Quilter, added: "Recent mortgage rate increases risk taking some momentum out of the housing market just as confidence had started to improve."

He noted that falling borrowing costs and the Middle East ceasefire had encouraged some prospective purchasers to resume property searches or revisit postponed plans.

"Ultimately, this slew of rate hikes may force more people into wait-and-see mode while sticking their housing plans on ice," Mr Futcher said.

However, some analysts sought to provide reassurance that conditions remain better than earlier this year. According to data firm Moneyfacts, average two-year rates hit 5.89 per cent in April but have since dropped below 5.5 per cent.

The lowest available rates currently sit under 4.2 per cent for certain borrowers. Nicholas Mendes of John Charcol brokers said: "Rates remain well below where they were during the spike earlier this year, and the market has shown throughout 2026 that when conditions settle, lenders are quick to pass falling costs back to borrowers."

For those looking to purchase or remortgage in the coming weeks, advisers recommend securing a deal promptly rather than waiting.

Mr Mendes added: "Products can typically be reserved up to six months before completion, and if pricing improves in the meantime, most lenders will allow a switch to the cheaper deal."